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Archive for February, 2010

Expensive week!

February 23rd, 2010 at 06:05 pm

I got a phone call from DH yesterday saying that his laptop had officially died. We weren't really expecting it, but I did know it was falling apart and in much worse condition physically than my computer. I don't know what he'll get to replace it, but I'm sure it will cost $500-1000. A funny side note is he bought it while in Italy 2 years ago on a detachment and he's now in Italy on the exact same detachment.

He's not the only one spending money though. I bought LexiComp for my phone. It normally retails at close to $300, but with my student discount I got it for nearly half price. It was something I was planning to get here soon, so when it was on sale I jumped on it.

I also joined a gym. I decided to go with the month-to-month rather than the year long contract. It works out to be $8 a month more, but if I decide in 2 months I hate it, it would be much cheaper to cancel. I also figured that I needed to do this for me. I've been starting to run and am pseudo-training for a 15K. I've been running off and on for 2 months now, but the weather has been a big hurdle. So with the gym that excuse is off the table.

So we have spent a lot this week, but thankfully we have the money to be able to handle it.

Tax Refund

February 18th, 2010 at 05:17 pm

DH and I got our tax refund earlier this week. I can't believe how fast it came! As soon as I noticed it hit our checking account I quickly transferred it to our ING savings account. Don't want to waste a second of higher interest. Smile

We get a huge refund, over $2500. I know that we shouldn't be letting the government have it interest free, but we don't have a strong need for it and apparently the government does. Also I'd much rather be receiving money than having to pay.

This is the second year in a row we've had large refunds. I'm sure it's because I barely contribute to our income and we have to pay tuition. This next year, 2010, we may also be able to itemize our deductions and save any more. Although I haven't crunched the numbers yet to see if the interest on the house and possible interest from the student loans would make it worth it to itemize.

In anticipation of this I've increased the number of exemptions claimed on DH. Hopefully this will give us some more cash throughout the year but not make it so we have to pay come tax time.

As far as the refund goes I don't think we had a set plan for it. I did put some of it into our vacation fund in anticipation for our two week trip to Costa Rica. The rest of it has gone to our "housing/downpayment fund." That's sort of our catch-all for any extra money. When DH gets home the end of the month we may discuss if that's what we want to do or to put the money into other places.

Millionaire Next Door

February 17th, 2010 at 02:49 pm

Wow I just found an old post that I was going to put on my blog but must have forgotten to do. It's my review of sorts of the Millionaire Next Door.

I just finished reading the Millionaire Next Door written by Thomas Stanley and William Danko. I have heard a lot about this book so I was curious about reading it. However, I was a little disappointed with it. First of all, it is not really written for 25 year olds. I do not really know who would benefit the best from this novel, but I am not its primary demographic. This is also not a normal personal finance book that makes suggestions on how you should change your life to increase wealth. Rather, it is merely a collection of statistics about the average millionaire in America. (The fact that the “average” millionaire is a 57 year old self-employed male may explain my difficulty in relating to some of the things in the book.)

Things that bode well for us:
There are several common themes that run through the book. The first is that despite our exposure to celebrity millionaires who have all the latest toys and blow money left and right, most of the millionaires are quite frugal. Purchasing items on sale or using coupons is common.

They spend more time tracking where their money is spent and planning for future financial endeavors.

I like that they have a formula to determine how much money a person should have saved: 10% of your age multiplied by your income. At age 25 and an income of roughly 50,000, DH and I should have saved roughly $125,000. Not going to happen. My initial thought was that it is skewed for older workers. I mean, I haven’t really had my first job yet and DH has only been working for 2 years. There is no way that in 2 years we could have saved $125,000. It does make me think that we could be doing better though.

*Update: DH is now further into his career and his income has leaped up. I, however, am still in school. Our new goal is about $220,000. However we are MUCH closer to reaching that than we were 2 years ago. We've started and fully funded our Roths, we started contributing to TSP, and our savings account has nearly doubled. At least I see that saving that much could be possible*

There was a large portion of the book that related to educating children about money and enabling them with gifts. Not having kids, I haven’t had a chance to mess that up yet. It made me reflective of my own childhood though. My parents lived fairly frugally, I don’t know how much money we had, but we didn’t live extravagantly, but there was always enough money for me to do what I wanted. I have always been interested in money and lived pretty frugally. I think that it was more of an internal thing, but maybe some of it was shaped by how my parents were. If you needed something you bought it, if you didn’t need it, you didn’t buy it. And we didn’t need a lot of things….we didn’t try to keep up with the Jones. Actually my parents bought our first DVD player after I was out of high school, probably in 2002 or so. My step-dad still has dial up internet.

But it did make me realize how important it is to teach children to be financially aware and financially responsible. I’m sure DH and I will help our children out financially at least for school, both of our parents helped us. But I think we’ll also take more of a hands-off approach and make them do it on their own too.


Another thing the book seemed to emphasize was that most of the first generation millionaires are all self-employed. This was a little disheartening to hear as that isn’t really a plan for me. They say that many of them are tax advantaged and that the income they earn is only a small percentage of what they make. I wonder if it is possible to have a similar tax shelter without having a business for write-offs. I mean, does increasing the amount I have in my Roth, increase my net worth without increasing my taxable income? Would a traditional IRA/401(k) have a similar effect? Are there non-retirement accounts that would do this?